Sunday, June 23, 2013

Premier League 2011/12 - Some Girls Are Bigger Than Others

Although I have previously posted a summary of the 2011/12 Premier League finances on Twitter, I have received numerous requests to include them in a blog post, so that people can refer back to them, so that's what I am going to do here.No further analysis, just figures and graphs - well, they do say that a picture paints a thousand words.All these figures have been taken from the clubs' published accounts, though I have made a couple of presentational adjustments in order to prepare like-for-like comparisons between clubs, e.g. they do not all use the same revenue classification. In this way, I have had to use estimates for QPR and Swansea City, who do not provide a full analysis of their revenue (the total figures are unchanged). Similarly, I have taken the Deloitte Money League revenue split for Manchester City, as the club accounts include some match day income in commercial.Furthermore, Liverpool moved their accounting date in 2011/12, so their year only covered 10 months. In their case, I have taken annual revenue figures from Deloitte for any revenue comparisons, while I have annualised their wage figures.Obviously, these figures are now out-of-date, but 2011/12 is the last year in which all Premier League clubs have published their accounts, so that is all we can use at the moment. In addition, Premier League clubs' finances will be significantly impacted by the new TV deal, which kicks off in the 2013/14 season, boosting clubs' revenue by £20-35 million a season, depending on where they finish in the league table.Nor do these figures include the impact of lucrative new sponsorship deals, such as Manchester United's Chevrolet shirt sponsorship, Arsenal's Emirates/Puma deals or Chelsea's Adidas kit deal.So, it is what it is. Hopefully, it still provides a useful aide-mémoire for people.OverviewAn overview (in alphabetical order) of the club's profit and loss accounts. In this section, Liverpool's figures are as published, thus only covering 10 months, due to the change in accounting date.

Profit/(Loss) before TaxAlmost half of the Premier League clubs (9 out of 20) reported profits in 2011/12 with Arsenal making the most money at £37 million.

Profit/(Loss) after TaxA similar story for profit/losses after tax, though Manchester United benefited from £28 million of tax credits, while Arsenal's £7 million tax bill brought their net profit down to £30 million.

RevenueA wide range of revenues in England's top flight with six clubs earning more than £100 million a season: Manchester United £320 million, Chelsea £258 million, Arsenal £235 million, Manchester City £231 million, Liverpool £189 million and Tottenham £144 million.

Match Day RevenueSome big differences in match day revenue with Manchester United generating £99 million a season, compared to Wigan's £4 million.

Media RevenuePremier League TV money is distributed on a fairly egalitarian basis with the top club only receiving around 1.5 times as much as the bottom club: Manchester City £60.6 million, Wolverhampton Wanderers £39.1 million. However, the importance of Champions League revenue is clear to see with the four English clubs earning between £23 million and £48 million from Europe's flagship competition.

Reliance on TV MoneyEven before the new TV deal commences, 6 clubs relied on TV for over 70% of their total revenue with Wigan "leading the way" at nearly 88%.

Commercial RevenueThis is a fast-growing category, especially for the leading clubs, as revenue generation becomes ever more important in the era of Financial Fair Play. Manchester dominates here with United earning £118 million and City £112 million.

Profit on Player SalesFollowing the sales of Cesc Fabregas to Barcelona and Samir Nasri to Manchester City, Arsenal made by far the highest profits on player sales at £65 million. In fact, without these profits, the club would have reported an accounting loss.

WagesFive clubs had wage bills above £100 million: Manchester City £202 million, Chelsea £176 million, Manchester United £162 million, Arsenal £143 million and Liverpool £131 million.Note - I have made a couple of adjustments to the published figures here: (a) I have added back the £4.7 million exceptional credit to Chelsea's £171.0 million staff costs (per note 4 in the accounts); (b) for Liverpool, I have taken the £109.2 million from note 4 of the accounts (Administrative expenses) as opposed to the £118.7 million included in note 6 (Directors and employees), because the latter figure includes exceptional costs (staff termination payments) and then annualised it.

Wages to TurnoverThe best (lowest) ratios come from two promoted clubs (Norwich City 49%, Swansea City 53%) and two more established clubs (Manchester United 50%, Arsenal 61%). The 4 clubs with the worst ratios are Blackburn Rovers 92&, QPR 91%, Manchester City 87% and Aston Villa 87%.

Other ExpensesManchester City and Chelsea have the highest other expenses, mainly due to player amortisation (the annual charge for writing-off a player's purchase price), which was £83 million and £50 million respectively.

Gross DebtManchester United £437 million and Arsenal £253 million have by far highest gross debt, the former as a result of the Glazers' leveraged takeover, the latter due to funding the construction of the Emirates stadium. Other clubs with high debt include Bolton Wanderers £137 million, Newcastle United £129 million and Aston Villa £122 million.Note: Chelsea's net funds figure is taken from the football club's accounts. Some £895 million of loans still exist in the holding company. They are interest free, but are repayable with 18 months notice. It must be considered unlikely that Abramovich would ever call in this debt, but it is theoretically possible.

Net DebtArsenal look better on net debt, after significant cash balances are taken into consideration, leaving Manchester United out on their own with £366 million.

Net Interest PayableManchester United's £50 million annual net interest stands out here, being nearly four times as much as the next club (Arsenal with 13 million). Interest actually paid is not necessarily equal to the interest payable figure in the profit and loss account, as it is sometimes accrued (so not paid), but both these clubs made cash payments of a similar size in 2011/12.

CashArsenal have easily the highest cash balances with £154 million, over twice as much as Manchester United £71 million. The next highest balances are even lower: Chelsea £17 million, Norwich City £17 million and Tottenham £16 million.

AttendancesFor the sake of completeness, I have included average attendances, though most clubs do not formally publish these figures in their accounts. Instead, I have taken these numbers from the good folk at Soccerway.

So, there we have it, a financial overview of the Premier League in the 2011/12 season. At the risk of stating the obvious, they're only numbers: if one club has higher revenue than another club, it does not mean that they're "better" - just that they earn more money and (probably) have more spending capacity. To put this another way, let's quote The Smiths, "some girls are bigger than others, some girls' mothers are bigger than other girls' mothers."

Do you have any way of presenting 'cash at hand' to exclude the season ticket revenues, which obviously form a uniquely cyclical amount and are, given the date of accounts usually being around the time that all that money comes in but little if any has been spent, artificially inflating 'cash at hand' figures, particularly at Arsenal and Man Utd due to their huge season ticket revenue streams?

Arsenal actually require their premium level season ticket holders to pay up before the outcome of the previous season is known. They are asking you to pay for a car without actually knowing what model you're going to get. In most businesses, this would be illegal, but football is football, after all. Now if it's blindingly obvious that Arsenal will qualify for the Champions League, that's one thing. To say that that has been blindingly obvious in March the past couple of seasons would perhaps be stretching credulity beyond breaking point.......

I'd personally subtract about £70m from Arsenal's 'cash at hand' figure to reflect the fact that the season ticket money has all come in but hasn't been spent yet.........

My kind of take on how to do this is to make an assumption that 50 - 70% of matchday revenues come from cyclical annual payments for season tickets, corporate hospitality etc and that this will be sitting in the 'cash at hand' figure on annual accounts day.

I'd therefore subtract that figure from the quoted one to get a true position of what the club's underlying cash position is.

In the case of Arsenal, that's stlll very strong, but it's not quite as fantastic as they would like to make out......

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation